Miami Herald - September 27, 2004
BRAZIL Mired in slow growth, economy now booming
Growth has been brisk in South America's largest economy as automotive, soybean, citrus, beef and chicken exports surge. BY KEVIN G. HALL Knight Ridder News Service
RIO DE JANEIRO - Led by a boom in farm exports and car manufacturing, Brazil's economy is bouncing back after years of sluggishness.
It's good news not just for Brazilians, but also for U.S. companies and investors who've plunked billions into Brazil.
The country has been mired in slow growth since 2001, and last year its economy, the largest in South America, shrank slightly.
The latest economic figures tell a new story. Second-quarter growth topped 5.7 percent compared with the same quarter of 2003. A survey of financial experts released by the government earlier this month shows expected economic growth of at least 4.23 percent this year.
Burgeoning exports of soybeans, beef, chicken and citrus helped. In addition, falling interest rates prodded industrial and personal consumption.
If there's a fly in the ointment, it's that interest rates are likely to rise in the future to hold down inflation. And from Washington's point of view, there's a second downside: Brazil's top farm exports all challenge U.S. producers in global markets.
MIDTERM ELECTIONS
The timing of Brazil's surge couldn't be better for the country's leftist president, Luiz Inácio Lula da Silva. Midterm elections on Oct. 3 are tantamount to a referendum on his government.
''We are reaping what we have sown, and we will reap even more,'' Lula da Silva boasted recently on his bi-monthly radio program, Coffee with the President. He promised to use the economic gains to fund social investments.
Lula da Silva, who surprised detractors and wary foreign investors by sticking faithfully to the U.S.-espoused open-market policies and fiscal discipline, deserves much of the credit. Embracing these policies cost him support among the more radical elements in his Workers' Party (PT).
''What does this mean for the government? It is tremendously important,'' said Christopher Garman, an analyst with Tendencias, an economic research and consulting firm in Sao Paulo. 'The Workers' Party traditional base of support is in large metropolitan regions, which are sensitive to high unemployment. With the economy going well and unemployment going down, this sort of concern diminishes.''
Another reason for cheer in Brazil: The trade surplus through August totaled more than $22.8 billion, topping full-year estimates. The surplus for the year could top $30 billion, thanks largely to agricultural commodities.
Farm exports through August exceeded $26 billion, Brazil's best performance since 1989, according to the country's commerce department. The discovery of mad-cow disease in the United States in December 2003 helped, as Brazilian cattlemen stepped in to fill the void caused by foreign bans on U.S. beef. U.S. exports of beef and live cattle are expected to plunge 83 percent this year.
HELPED BY HURRICANES
Hurricanes ravaging Florida are sure to benefit Brazilian growers in a similar way. Hurricanes Charley and Frances have hit Florida citrus crops hard.
In South America, Brazil's rebound is welcome news.
''I think the growth numbers will positively affect the region,'' said Rogerio Mori, an economist with the Getulio Vargas Foundation, an economic think tank in Sao Paulo.
Just as strong U.S. economic performance helps Canada and Mexico, a robust Brazilian economy tends to enhance the fortunes of Brazil's neighbors in South America, Mori said.
U.S. and European carmakers in Brazil helped the economic turnaround, too. Production of cars, light trucks and farm tractors hit an August record of 198,100 vehicles.
More than 1.42 million vehicles were produced in the first eight months of 2004, up 21.3 percent.
The National Association of Automotive Manufacturers said August was also a record month for automotive exports, defined as parts, cars, light trucks and farm tractors.
They totaled more than $773 million for August and $5.14 billion since the beginning of the year, up 54 percent.